Indonesia to be big winner from carbon tax

THE carbon tax will put Australian coal exporters at a significant disadvantage to other exporters in the region, especially Indonesia, as no other major coal producing country imposes a direct climate policy constraint on fugitive coal mining emissions.
Indonesia to be big winner from carbon tax Indonesia to be big winner from carbon tax Indonesia to be big winner from carbon tax Indonesia to be big winner from carbon tax Indonesia to be big winner from carbon tax

Leighton at work at MSJ Coal mine in Samrinda, Indonesia.

Lou Caruana

Other exporting nations such as the United States and emerging producers such as Mozambique also stand to gain, according to a report commissioned by the Australian Coal Association.

“Based on currently available information, none of the major coal exporting countries either currently, or has concrete plans to, impose a direct or indirect constraint on fugitive emissions from coal mining,” the report said.

“In some cases, coal miners may face an increase in energy costs, however this is very modest given current prices.”

Indonesia is a major exporter of thermal coal, exporting more than 200 million tonnes in 2009. By comparison Australia exported a little over 100Mt in 2009 but used a significant amount of its thermal coal production for domestic power generation.

Indonesia is one of the largest greenhouse gas emitters in the world, with up to 85% of its emissions resulting from deforestation or the destruction of peat lands.

As a consequence, the major focus of climate policy in Indonesia is peat, forestry and land use. For example, Indonesia’s voluntary actions under the Copenhagen Accord involve an emission reduction of 26% by 2020 achieved through sustainable peat land management and a reduction in the rate of deforestation and land degradation.

The report found that, given attitudes toward energy security in Indonesia, a carbon tax remained unlikely in Indonesia.

“Around 90% of Indonesian coal mines are open cut mines, making measurement and regulation of fugitive emissions difficult,” it said.

“As a consequence, coal producers in Indonesia do not currently face a carbon price or a constraint on fugitive emissions.”

An important developing policy issue in Indonesia is a proposed regulation of coal export quality. The object of this policy appears to be to secure more coal for domestic use and to maintain a low price for domestic generators.

While not explicitly a carbon abatement measure, this policy will clearly have implications for international trade in coal.

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